MSE News: Budget 2013: Help to Buy mortgage scheme to launch

kingstreet

Wallhart wrote: »

And even then do you trust banks to pass that lower cost of capital onto us

If we assume this will simply continue the Firstbuy and Homebuy Direct ethos, the borrower does get a 75% rate if they take a 20% equity loan and put down a 5% deposit, so the scheme does have an interest rate benefit.

However, unless there are significant new entries into this market, the current lenders involved, Halifax, NatWest, Barclays and Nationwide will continue to dominate.

Banks can package mortgages into covered bonds on sell them to raise money to issue more. Obviously it's not the only way of raising finance. The whole bank crisis before was based off of prime mortgages being packaged up and sold. When @ hit the fan these assets become worthless. But doing this isn't a bad thing if you used 60% ltv mortgages rather than 95%. Scandinavia have a huge mortgage backed security market underlined by very strong and save mortgage books.

When I first started in the industry in the mid-80s, securitisation was only just starting in the UK. The likes of The Mortgage Corporation, National Home Loans etc only packaged sub-60% AAA-rated mortgages in their RMBS to be able to offer the security as AAA rated.

The "crisis" came about because (primarily to start with) US lenders started mixing different asset quality within an RMBS and this resulted in the uncertainty of banks no longer trusting each other. So far, recent new RMBS offerings in the UK have all been AAA rated, low LTV stuff.

It didn't help that the likes of AIG and MBNA were allowed to sell credit default swaps with no collateral. Allowing them to issue such cover, backed only by their AAA rating is one of the major causes of the depth of the crunch.

Once the problems with the RMBS quality started to emerge, the investors looked to their cover and found the possibility of claims went through the roof, so AIG had to raise $80 billion in short order when it suddenly needed collateral.

If collateral had been needed in the first place, it's doubtful there would have been as much cheap credit sloshing around that lenders would have been able to, or wanted to offer the mortgages they did.

Jo69

Suarez wrote: »

I don't see why they are trying to reduce the amount of deposit house buyers need. 10% is already quite low and easily achievable.

Not when your remarried, your husband is self employed in the current climate, there's CSA to pay and ridiculous rental costs to pay for poor quality housing which costs more in utility bills due to it's poor insulating properties and not a penny in benefits... So any help to get out of poor quality rented accommodation is greatly appreciated ...:(

Amybetty

EDIT*** I think I've worked out where the information is coming from now! The key is in the word "equity" and I've found the information on the 'Firstbuy' scheme... please forgive my ignorance!

I'm confused by all of the people saying that if you take the 20% equity loan from the government you then pay back 20% of whatever your property value is at the time of repayment. Where is this information coming from??

The information on the treasury website for the scheme suggests that you repay the loan either at the point of sale or any time within the mortgage term. Surely this is just the amount you borrowed plus interest?? If you paid back prior to the end of your mortgage how would the government know the exact value of your property and what value it has been over the course of the loan to work out the 20% you owe plus the interest built up over the years??

We are seriously considering this scheme (combined income of about 60K, 10% deposit though this would wipe out our entire savings and the 6-7K equity in the current property, and need to move as looking at starting a family in the next few years and current property isn't big enough) so we are trying to get our heads around what it all means...

Jo69

opaque wrote: »

Bit of an assumption that people are spending money on those things isn't it?

I've sold my car and walk to work, don't go out, smoke or been on holiday for 2 years... My husband is self employed so my contribution is varied depending on his income per month, and I'm also a civil servant who has not had a pay rise for 3 years..My rent is over £600 per month for a heat lose shed so there is no way I can reduce my costs anymore !!!!!!!

kingstreet

Amybetty wrote: »

EDIT*** I think I've worked out where the information is coming from now! The key is in the word "equity" and I've found the information on the 'Firstbuy' scheme... please forgive my ignorance!

I'm confused by all of the people saying that if you take the 20% equity loan from the government you then pay back 20% of whatever your property value is at the time of repayment. Where is this information coming from??

The information on the treasury website for the scheme suggests that you repay the loan either at the point of sale or any time within the mortgage term. Surely this is just the amount you borrowed plus interest?? If you paid back prior to the end of your mortgage how would the government know the exact value of your property and what value it has been over the course of the loan to work out the 20% you owe plus the interest built up over the years??

We are seriously considering this scheme (combined income of about 60K, 10% deposit though this would wipe out our entire savings and the 6-7K equity in the current property, and need to move as looking at starting a family in the next few years and current property isn't big enough) so we are trying to get our heads around what it all means...

Yes. Use the Firstbuy rules as a guide;-

After you have owned your home for a year you will be able to ‘staircase’ if you choose. Staircasing is purchasing a higher share of your property or making part repayments on your FirstBuy equity loan. These repayments will be at the current market value at the time and the 10% of the total market payment is minimum additional repayment you can choose.
.
If you decide to sell your home, you will repay FirstBuy from the the required percentage share of the sale proceeds of the property. For example, if your FirstBuy equity loan was originally for 30% of the full market value of your home and you had not stair cased at any point; you would repay 30% of the full market value when it came to selling.

http://www.firstbuyscheme.org.uk/firstbuy.php

Thrugelmir

Wallhart wrote: »

It's to do with capital regulations. A bank has to hold roughly 6 times as much in capital to lend a 95% mortgage than a 60%. There is a cost to hold that extra capital which is why 95% mortgages are so much more expensive in terms of interest rates

Forecasts vary. As the sums involved are immense. Last article I read was suggesting a fall of around £600 billion in existing lenders mortgage books with around £180 billion of new money from new entrants to the mortgage market. So a net contraction of around 35%. A fall of £420 billion.

So I'm sure that the budget proposals were made in consultation with the BOE. As the contraction in the wholesale money markets has been on the agenda for some years (BOE Report May 2009). The issues in Cyprus merely show how much further there is to go. Before the banking system globally stabilises.

brit1234

Jo69 wrote: »

Not when your remarried, your husband is self employed in the current climate, there's CSA to pay and ridiculous rental costs to pay for poor quality housing which costs more in utility bills due to it's poor insulating properties and not a penny in benefits... So any help to get out of poor quality rented accommodation is greatly appreciated ...:(

Even if it means being left in instant negative equity and have to pay back the equity loan plus mortgage after 5 years when mortgage rates will be far higher.

Its a nightmare being born.

Kidg

Amybetty wrote: »

I'm confused by all of the people saying that if you take the 20% equity loan from the government you then pay back 20% of whatever your property value is at the time of repayment. Where is this information coming from??

The information is correct - you will pay it back (the interest free loan) as a percentage of the current market value of your home.

For example:

Your home cost £200,000 when you bought it and you had a 20% equity loan of £40,000
If your home is worth £300,000 when you sell it, you will pay back 20% of £300,000 ie £60,000

See our local HomeBuy Agent: Orbit Homebuy Agent (I'm not allowed to post links as I'm a newbie!)

Unless they have got it wrong because as you say, it does not state this on the HM Treasury website!?!

mickael28

Question about

Q&A: 20% deposit towards a new-build
When must I pay the loan back?
* The loan can be repaid at any time within the mortgage term or on sale of the property.

In this scheme, let's say that the loan is for £20,000; would you always need to repay that exact amount regardless of the house price going up/down or would the amount you need to repay depend on the current house valuation, ie, owing more if house prices increase and less if they go down?

kingstreet

You repay the percentage of the current value you borrowed at the purchase.

If you borrowed 20%, you repay 20%, whether high, or lower, at the time.